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The backstory: There's been some buzz about Apple's key suppliers exploring alternative manufacturing locations beyond China. The driving forces behind this shift are the ongoing US-China trade tensions and pandemic-related disruptions to supply chains. Tech companies, in particular, are eager to explore other headquarters now that the US has curbed chip exports to China.
More recently: Apple has been keeping its lips sealed about expanding outside of China, but it did confirm in December that it's going to be buying chips made in the US. But, it looks like nine out of Apple's top 10 suppliers are getting ready to shift operations to other countries, like India, according to an executive at GoerTek, which makes Apple's popular AirPods. India's offering some pretty sweet incentives with its "Make in India" initiative, so it's no wonder the country is attracting attention.
The development: According to Bloomberg Intelligence, it could take up to eight years just to move 10% of Apple's production capacity away from China. But GoerTek's Deputy Chairman Kazuyoshi Yoshinaga predicts this will happen much faster than expected. The company is already investing US$280 million in a new plant in Vietnam and considering expanding into India.
For now, Vietnam is GoerTek's only manufacturing site outside of China, but it's planning on getting more than half of its global revenue from this site in three years. Yoshinaga said the location is ideal because it's close to China and has coastal ports, a young and educated workforce and relative political stability.
"We get requests from our clients almost every month. 'Do you have any plans to expand to India?'" said GoerTek's Deputy Chairman Kazuyoshi Yoshinaga. "If they decide to build up the production lines in India, we may have to think about it seriously. Currently, we are focusing on developing our Vietnam production facilities."
"The ongoing tensions with the U.S.-China trade relationship continue to highlight the need for supply chain diversification," said Jon Gold, vice president of supply chain and customs policy of the National Retail Federation to CNBC. "From the tariffs to Covid-19 to additional challenges, retailers are looking for opportunities to diversify their sourcing to ensure they have resilient supply chains to meet consumer needs."
"Apple would not be the company that it is today without China as a manufacturing base," said Eli Friedman, a professor at Cornell University. "It's not going to entail a decoupling from China – there's going to be Apple products that are made in China for a very long time."